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CLS Group, the plumbing network behind the vast currencies markets, is branching out further with its new netting service, putting it deeper into competition with the growing number of post-trade processing firms.
The super-resilient industry utility, established in 2002, works very closely with regulators and uses the backing of central banks around the world to ensure that all sides of currencies trades get paid simultaneously.
Typically, getting a currency on board demands months of hard work with central banks and regulators to ensure systems are robust. Fewer than 20 currencies make the grade for this kind of ‘full’ CLS treatment.
But in September, CLS announced work on a parallel new venture encompassing the core currencies as well as others including the Russian rouble and Chinese renminbi, enabling banks and others to net currencies between each other bilaterally in a standardised fashion – a space that many new start-ups and other private-sector technology firms have been seeking to develop.
Today, the utility is expanding the new initiative to cover all of the world’s non-sanctioned currencies – a total of around 140. The number of banks and institutional investors committed to using the service when it launches next year has also risen from 14 to 21.
Adam Levine, an executive director at CLS, says the aim of the new venture was always to be “as comprehensive as possible”, enabling it to reach users, currencies and products that are not currently covered by the ‘gold standard’ full CLS service.
This may grate with other players in post-trade processing, some of which are using new technology to compress large numbers of trades into smaller packages for completion – a challenge to CLS’s core model.
“The post-trade netting space is competitive,” said Adam Levine, an executive director at CLS. “We are a utility and there are some strong benefits that come with that.”